Two Brazil Education Firms File For IPOs; More M&A Expected in Brazil

Two Brazilian education firms this week filed for initial public offerings, amid widespread interest in the booming education industry in Latin America’s largest nation.

On Friday, GAEC Educacao SA, which operates under the brand name Anima Educacao, said it plans to raise as much as 626 million Brazilian reais ($282 million) from an IPO while on Tuesday, Ser Educacional S.A and its shareholders unveiled a plan to raise up to 976.5 million reais from an IPO.

Both companies said they will use proceeds to finance their expansion via acquisitions across the nation.

The Brazilian market for private education services has grown rapidly over the past decade because of economic expansion, a rise in income and upward social mobility.

Growth has remained strong even as broader economic growth in Brazil has disappointed for three consecutive years. This scenario is attracting the interest of investors, prompting a series of mergers and acquisitions, as well as share offers.

“The education market is expanding, because now Brazilians are very clear about the importance of the education,” said Alexandre Furtado Montes, an industry analyst at Lopes Filho Consultores.

Mr. Montes cautioned that if the economy doesn’t start to recover as expected, continued weak economic growth could start to impact prospects for the education industry.

Anima has 48,000 students across 17 units in the states of Minas Gerais, São Paulo and Rio de Janeiro. The firm reported net revenue of 323.7 million reais last year, up from 254 million reais the year before. Net profit was 23.5 million reais, reversing a loss of 31.9 million in the previous year, according to the prospectus.

Anima said it will offer up to 28.47 million common shares to the public, including an overallotment option, and it expects to price the shares between BRL16.50 and BRL22.00. About one-fifth of the shares will be sold by 15 existing shareholders through a secondary offering, while the remainder will be new shares.

Anima said the shares will be offered between Oct. 11-24, and trading is expected to begin Oct. 28. The deal is being managed by Itau BBA, Bank of America Merrill Lynch and HSBC.

The company will list the new unit’s shares on the Novo Mercado mechanism, which is the country’s most rigorous in terms of corporate governance. To qualify, a company must sell at least 25% of shares to the public, and all of its shares must be ordinary rather than preferred shares. It will list its shares under the symbol ANIM3.BR.